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Why defense spending mysteriously surged 13% last quarter — and boosted GDP


Our economic heroes.
(unhappycamper comment: No shit - this caption from the Washington Post.)

Why defense spending mysteriously surged 13% last quarter — and boosted GDP
Posted by Brad Plumer on October 26, 2012 at 11:40 am


Still, the huge uptick last quarter was unusual. So what happened? Here’s one explanation: “In the Pentagon, you have to use it or lose it by the end of the fiscal year in September,” says Lawrence Korb, a former assistant secretary of defense now at the Center for American Progress. “You see this a lot. ‘We’ve got to fly a lot this month for training, otherwise Congress will take back the money they gave us.’ “

Michael O’Hanlon, a defense analyst at the Brookings Institution, concurs that defense expenditures often rise just before the end of the fiscal year in September. Every year, Congress provides the Pentagon with a certain amount of budget authority. If the military doesn’t spend the full amount, there’s the risk that lawmakers could come back the following year and reduce the defense budget. “The Pentagon wants to show that the money’s well spent,” says O’Hanlon. “But they can also fall out of favor with Congress if they spend too little.”

But then why was the surge in military so unusually large this past quarter, compared with previous Septembers? Two reasons. First, the Pentagon is facing the prospect of sharp budget cuts at the end of the year as part of the looming sequester. There’s been some talk that the military could even lose money that’s already been budgeted but hasn’t been spent yet — so the Pentagon has additional incentive to spend funds now that have been budgeted over multiple years.

The other factor, Korb and O’Hanlon note, is that Congress was late in setting the defense budget for fiscal year 2012: The budget was finally patched together through continuing resolutions in the winter. So, for a significant period, the Pentagon was unsure exactly how much it could actually spend. That could help explain why defense expenditures and investments were relatively anemic earlier this year and then skyrocketed right before the fiscal year ended in September.
Posted by unhappycamper | Sat Oct 27, 2012, 10:29 AM (1 replies)

Boeing invites suppliers to conference on outsourcing to Mexico


Boeing invites suppliers to conference on outsourcing to Mexico
By Dominic Gates Seattle Times aerospace reporter

Boeing is actively encouraging its suppliers to outsource work to Mexico.

Patrick McKenna, director of Supply Chain Strategy and Supplier Management at Boeing Commercial Airplanes, has urged suppliers to attend a Nov. 15 workshop in Chicago to learn how to do business in Mexico.

"Several of our suppliers have successfully set up factories in Mexico because of the numerous advantages that Mexico offers to aerospace suppliers," McKenna wrote in a letter dated Oct. 17. "Boeing will be sending several people to this event, and we wanted to inform our supply base of this opportunity."

The event's organizers will waive the $200 registration fees for Boeing suppliers, he said.
Posted by unhappycamper | Sat Oct 27, 2012, 09:28 AM (1 replies)

Binders Full of Generals


Binders Full of Generals
Thursday, 25 October 2012 10:51
By Dina Rasor, Truthout


Retired General James Conway: Conway is a retired four-star general. Last year, he was named to the Board of Directors of Textron, which manufactures helicopters and other aircraft and products for the military.

Retired Navy Admiral James B. Busey: Busey served in the Navy until 1989. After leaving the federal government in 1992, he joined the board of directors of defense contractor Curtiss-Wright and left in 2008.

Retired former commander of United States Strategic Command James O. Ellis: After serving his country, Ellis decided to make a fortune by working for the defense industry. He serves in the leadership of the Institute of Nuclear Power Operations and also has a board position at Lockheed Martin.


Retired Air Force Commander William R. Looney III: Looney actually campaigns on behalf of for-profit colleges that are under fire for abusing military veterans. Those colleges actually are a huge beneficiary of dollars from the Veterans Administration, and thus represent an often under-looked form of defense contractor welfare.

Posted by unhappycamper | Sat Oct 27, 2012, 08:15 AM (1 replies)

Remote US Base at Heart of Drone Wars Revealed in New Report


"This Predator MQ-1B crashed while trying to return to Camp Lemonnier, the U.S. military base in Djibouti, on May 17, 2011. It landed in a vacant lot near a residential area of Djibouti city, about 2.7 miles short of the runway."

Remote US Base at Heart of Drone Wars Revealed in New Report
- Common Dreams staff
Published on Friday, October 26, 2012 by Common Dreams

Deadly US drone attacks in the Middle East and Northern Africa have greatly escalated in the past few years, thanks largely in part to a quickly expanding, yet remote, US base in the Horn of Africa, according to military documents obtained by the Washington Post.

"This Predator MQ-1B crashed while trying to return to Camp Lemonnier, the U.S. military base in Djibouti, on May 17, 2011. It landed in a vacant lot near a residential area of Djibouti city, about 2.7 miles short of the runway." (Photo: Washington Post/U.S. Air Force) Camp Lemonnier in Djibouti has operated as a central command for US attacks in the region for ten years, but in the past two years it has become the pinnacle centerpiece of drone operations in the region, "the busiest Predator drone base outside the Afghan war zone," and a vehicle for the US's expanding war in the region.

A new Washington Post exposé on the base paints a telling picture of the increasingly deadly scenario.


The Defense Department delivered a master plan to Congress in August showing expansions of the base over the next quarter-century. Roughly $1.4 billion in construction projects are now planned, including a massive housing compound holding up to 1,100 Special Operations forces.

unhappycamper comment:
Posted by unhappycamper | Sat Oct 27, 2012, 07:58 AM (1 replies)

Joe (You Lie) Wilson Lies About Sequestration

Here is Joe's 10/25/2012 take on sequestration:


Obama administration behind sequestration cuts, says Joe Wilson
By: John Gizzi
10/25/2012 10:40 AM

Republican Rep. Joe Wilson of South Carolina in an exclusive interview with Human Events, says he politely disagrees with Obama about his administration’s role in the drastic defense spending cuts scheduled to take place through sequestration.

“I beg to disagree with the president’s denial of an administration in the sequestration process,” said Wilson, who is a member of the Armed Services Committee, specifically citing references to Bob Woodward’s new book on the Obama administration, “The Price of Politics”, which says that sequestration originated behind closed doors in the White House.

In September 2009, the soft-spoken South Carolinian congressman became the subject of national controversy when he interrupted an address by the president to a joint session of Congress by shouting “You lie!” Wilson later explained that he was moved to shout when Obama insisted that the Obamacare legislation would not provide health care to non-citizens, and he knew from the committee process that this was not the case. Wilson promptly called the White House and apologized to then-Chief of Staff Rahm Emmanuel.

Although Wilson said Emmanuel accepted his apology and the president has “always been gracious to (wife) Roxanne and me when we’ve been to the White House,” the Democratic-controlled House at the time formally rebuked the lawmaker. In addition, he became one of the top targets of national organizations when he ran for re-election in 2010. Wilson won handily and this year, he is unopposed for re-election.

Since Joe appears to be clueless about this sequestration, here's a little wikipedia for you, Joe:


The Budget Control Act of 2011 (Pub.L. 112-25, S. 365) is a federal statute in the United States that was signed into law by President Barack Obama on August 2, 2011. The Act brought conclusion to the 2011 United States debt-ceiling crisis, which had threatened to lead the United States into sovereign default on or about August 3, 2011.

The law involves the introduction of several complex mechanisms, such as creation of the Congressional Joint Select Committee on Deficit Reduction (sometimes called the "super committee"[1], options for a balanced budget amendment and automatic budget sequestration.



Debt limit:

The debt limit was increased by $400 billion immediately.[2]

The President could request a further increase of $500 billion, which is subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto.[3] This has been called the 'McConnell mechanism' after the Senate Minority Leader Mitch McConnell, who first suggested it as part of another scheme.[4]

The President could request a final increase of $1.2–1.5 trillion, subject to the same disapproval procedure. The exact amount depends on the amount of cuts in the "super committee" plan if it passes Congress, and whether a Balanced budget amendment has been passed.[3]

Deficit reduction:

Spending was reduced more than the increase in the debt limit. No tax increases or other forms of increases in revenue above current law were included in the bill.[5]

The bill directly specified $917 billion of cuts over 10 years in exchange the initial debt limit increase of $900 billion.[5] This is the first installment ("tranche" of cuts. $21 billion of this will be applied in the FY2012 budget.[4]

Additionally, the agreement established the Joint Select Committee on Deficit Reduction, sometimes called the "super committee",[1] to produce deficit reduction legislation by November 23, 2011, that would be immune from amendments or filibuster (similar to the Base Realignment and Closure).[4][6] The goal of the legislation was to cut at least $1.5 trillion over the coming 10 years and be passed by December 23, 2011.[6] Projected revenue from the committee's legislation could not exceed the revenue budgeting baseline produced by current law. (Current law has the Bush tax cuts expiring at the end of 2012.) The committee would have 12 members, 6 from each party.[5]

The agreement also specified an incentive for Congress to act. If Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts ("sequestrations"[note 1]).[3] These cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be in an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. There would be some exemptions: reductions would apply to Medicare providers, but not to Social Security, Medicaid, civil and military employee pay, or veterans.[4][5] Medicare benefits would be limited to a 2% reduction.[7]

As originally envisioned, these caps would equally affect security and non-security programs. Security programs would include the U.S. Department of Defense, U.S. Department of Homeland Security, U.S. Department of Veterans Affairs, the National Nuclear Security Administration, some management functions of the intelligence community and international affairs from the U.S. State Department.[8] However, because the Joint Select Committee did not report any legislation to Congress, the act reset these caps[clarification needed] to defense (essentially the DOD) and non-defense categories.[9]

Legislative history

Vice President Biden shook hands and congratulated President Obama immediately after a call between the president and Speaker Boehner in which they reached a deal for the Budget Control Act, July 31, 2011.
House vote by congressional district.

The bill was the final chance in a series of proposals to resolve the 2011 United States debt-ceiling crisis, which featured bitter divisions between the parties and also pronounced splits within them. Earlier ideas included the Obama-Boehner $4 trillion "Grand Bargain",[12] the House Republican Cut, Cap and Balance Act, and the McConnell-Reid "Plan B" fallback. All eventually failed to gain enough general political or specific Congressional support to move into law, as the midnight August 2, 2011, deadline for an unprecedented U.S. sovereign default drew nearer and nearer.[13]

On the evening of July 31, 2011, Obama announced that the leaders of both parties in both chambers had reached an agreement that would reduce the deficit and avoid default.[6] The same day, Speaker of the House John Boehner's office outlined the agreement for House Republicans.[14] One key element in the deal being reached and the logjam being broken earlier that afternoon was U.S. Vice President Joe Biden's ability to negotiate with his 25-year Senate colleague, Senate Minority Leader Mitch McConnell.[15][16][17] Biden had spent the most time bargaining with Congress on the debt question of anyone in the administration, and McConnell had viewed him as the one most trustworthy.[15][16]

The agreement, entitled the Budget Control Act,[1] passed the House on August 1, 2011 by a vote of 269–161; 174 Republicans and 95 Democrats voted for it, while 66 Republicans and 95 Democrats voted against it.[13] One moment of extra drama came when Arizona Congresswoman Gabrielle Giffords made her first appearance back on the floor of Congress following the near-fatal assassination attempt upon her in the 2011 Tucson shooting; she voted in favor of the bill.[13] Giffords received prolonged, loud applause from her colleagues and said in a statement, "I had to be here for this vote."[13]

Projected and known impacts

Congressional passage of the bill gave President Obama the chance to sign the Budget Control Act into law, which he did on August 2, 2011.

The act will not actually reduce the overall U.S. debt over the 10-year period it is specified for, only slow down the existing rate of growth of the debt.[12] That is partly because the cuts due to the act will not reduce federal spending in absolute terms, but rather reduce the year-to-year increases in spending from what had previously been anticipated.[2] Even with the slowdown, both federal spending and the debt are still projected to grow faster than the U.S. economy, due to the cost curve effects of health care, which the act does not address.[12]

The debate on the bill was driven by the Republicans' insistence on spending cuts as their condition for agreeing to raise the debt ceiling. This raised concern because of the relationship between aggregate demand and unemployment; as Patrick Lunsford, Senior Editor of insideARM.com stated in a Forbes magazine blog, "when government spending is slashed, jobs are lost and consumer demand falls."[26] During the debate over the bill, economists across ideologies agreed that reducing spending during a recession would likely make unemployment worse.[27] In analyzing the specific bill that emerged, the Economic Policy Institute stated, "The spending cuts in 2012 and the failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012, relative to current budget policy."[28]

Most of the $900 billion in the first tranche of cuts occur in future years and so will not remove significant aggregate demand from the economy in the current and following year.[4] Only $25 billion in federal discretionary spending is required to be removed for 2012.[2] Regarding the across the board cuts, these could not take place until 2013 and so if triggered, a new Congress could vote to eliminate or deepen all or part of them. Some top Republicans were particularly concerned that any defense cuts could not go into effect until after 2013.[4]

Passage of the Budget Control Act of 2011 was not enough to avert, three days later, Standard & Poor's downgrading the nation's credit rating for the first time in the firm's history, from "AAA" (highest) to "AA+" (highest, with qualifications).[29] They said they were "pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon."[29] (The United States Department of the Treasury pointed out an error of $2 trillion in Standard & Poor's calculation of the ten-year deficit reduction under the Act, and commented, "The magnitude of this mistake – and the haste with which S&P changed its principal rationale for action when presented with this error – raise fundamental questions about the credibility and integrity of S&P’s ratings action."[30]) S&P has partially disputed this claim of error, arguing that it is not as substantial as the Department of the Treasury is asserting, stating, "In taking a longer term horizon of 10 years, the U.S. net general government debt level with the current assumptions would be $20.1 trillion (85% of 2021 GDP). With the original assumptions, the debt level was projected to be $22.1 trillion (93% of 2021 GDP)." They further state that they used a spending inflation rate of only 5 percent in their calculations which is actually lower than the 7 percent spending inflation rate the Budget Control Act of 2011 assumes.[31]

Posted by unhappycamper | Fri Oct 26, 2012, 07:48 AM (0 replies)

Joementum And The Upcoming 5% Military Budget Cut


My Line on Defense—No More Cuts
October 25, 2012, 6:42 p.m. ET

There is broad consensus that when Congress reconvenes in November, it must act to prevent sequestration. That is the $500 billion cut in defense spending scheduled to go into effect on Jan. 2, which all parties agree would be catastrophic for our national security.

But as we contemplate proposals to ward off sequestration, we must not lose sight of a larger truth: Our armed forces are already under unprecedented strain because of the $487 billion in defense cuts imposed by the Budget Control Act last year. This budget reduction is delaying critical modernization programs and forcing our military to slash manpower and force structure.

That is why, in the post-election session of Congress, I won't support any debt-reduction package that requires our military to accept further cuts.

The reductions in military spending that we have already accepted weren't driven by improvements in the strategic climate facing our country. Contrary to claims that the "tide of war is receding," our national-security threats are becoming more complex and no less demanding or urgent.
Posted by unhappycamper | Fri Oct 26, 2012, 07:28 AM (1 replies)

More F-35 Woes

Oct 23, 2012:


Head of air force tells Canadian Press other planes not considered, later statement says that's not true

(Canadian) Air force contradicts itself on F-35 fighter jet options
The Canadian Press
Posted: Oct 23, 2012 9:39 AM ET

A statement from National Defence says the head of the air force misspoke when saying the Harper government had yet to direct the air force to look at aircraft other than the contentious F-35 stealth fighter.

The newly appointed commander of the Royal Canadian Air Force said in an interview last week with The Canadian Press that he's assigned a staff officer to work with a public works agency overseeing the CF-18 replacement program, but a thorough examination of other possible aircraft would require a more detailed study by military planners.


In its haste to answer the auditor general last spring, the government initially named its Public Works secretariat the "F-35 secretariat," a slip Mulcair says that indicates the fix is in.

Another government promise coming out of the bombshell report involved providing an independent cost-estimate for the radar-evading jets and its 25 years of follow-on support and maintenance by early June.

Oct 24, 2012:


Lockheed sees "great progress" on F-35 fighter
By Andrea Shalal-Esa
WASHINGTON | Wed Oct 24, 2012 5:36pm EDT

(Reuters) - Lockheed Martin Corp (LMT.N) on Wednesday said it was making "great progress" on the F-35 fighter jet program, with F-35 deliveries exceeding those of F-16 fighters and C-130J transport planes combined for the first time in the third quarter.

Chief Operating Officer Chris Kubasik, who takes over as CEO next month, said there were 94 F-35 jets in various stages of production at Lockheed plants in Fort Worth, Texas and Marietta, Georgia, plus a final assembly plant in Italy run by Alenia, a subsidiary of Finmeccanica SpA (SIFI.MI).


He said labor costs were coming down faster on the F-35 program than any previous fighter jet program in over 40 years. Lockheed is on track to hit its target unit "flyaway" cost, excluding development, of $67 million in fiscal 2012 dollars by 2018, he added.

The program was in the limelight again last month, when the Pentagon's future F-35 program manager, Major General Christopher Bogdan, said ties between Lockheed and the government were the "worst" he'd ever seen.

Oct 25, 2012:


Lockheed sees $1.1 billion liability if F-35 deal delayed
By Andrea Shalal-Esa
WASHINGTON | Thu Oct 25, 2012 7:08pm EDT

(Reuters) - U.S. weapons maker Lockheed Martin Corp (LMT.N) said on Thursday it faced a potential termination liability of $1.1 billion on the F-35 fighter program unless it received additional funding for production of a sixth batch of airplanes by year end.

Lockheed disclosed the potential exposure in a filing with the U.S. Securities and Exchange Commission a day after company officials cited "great progress" on the fighter jet program.

Chief Financial Officer Bruce told analysts on Wednesday that Lockheed expected to finalize a contract with the U.S. government for a fifth batch of fighter jets in the fourth quarter, which would help free up additional funding for planes in a sixth order.

He told reporters that failure to reach a deal on the fifth batch of planes by the end of the year would have little impact on Lockheed's 2012 results because it had already received funding for about 75 percent of the work on those planes.
Posted by unhappycamper | Fri Oct 26, 2012, 07:23 AM (1 replies)

Romney's Defense Proposals -- More Troops, Bigger Navy -- 'Mostly Bluster'


Romney's Defense Proposals -- More Troops, Bigger Navy -- 'Mostly Bluster'
By Rachel Kleinfeld
Published: October 24, 2012

While the politicization of four American deaths in Libya has some of the media distracted, those of us who care about defense need to look past the hype. The "he-said, she-said" accusations on the Libyan tragedy are obscuring major differences between Mitt Romney and Barack Obama on defense spending and strategy.

President Obama's goals are pretty clear. His main focus is ensuring that we have a strong economy to maintain American strength, so he is trying to keep non-stimulus spending down. He sees our future threats lying in Asia, and wants to rebalance more resources there. And he wants to invest in new energy sources so we move away from oil, and stop being dragged into endless Middle Eastern conflicts.

That means his plan actually expands defense spending overall, which will rise with the rate of inflation. But Obama will be cutting the rate of growth we've been on during the post 9/11 era, taking out $487 billion in projected spending. Troop strength would go from 1.42 million to 1.32 million – while drones and other people-saving equipment would likely expand. It's a typical no-drama Obama plan, one that focuses on the important (China, the economy) instead of the urgent (anything in the Middle East), and makes no lobbying group happy – a tough sell for a politician.


Strategy starts by looking at our threats and opportunities, then matches spending to our global ambitions. Pulling numbers out of a hat – whether to chop the Pentagon or raise the base budget – is no way to make these judgment calls. But conservative hawks and small-government aficionados are playing chicken with the Pentagon budget. And chicken-hawk Romney is not the man to call them on it.
Posted by unhappycamper | Thu Oct 25, 2012, 09:08 AM (1 replies)

The Coming Of The America Class: A Driver of Innovation


The Coming Of The America Class: A Driver of Innovation
By Robbin Laird
Published: October 24, 2012

A christening of a ship of the line is rare. When it happens, thoughts of how that ship might be used, where it might operate and how it might make new naval history are part of the excitement.


Although called an LHA, it is not. Rather than being a Landing Helicopter Assault ship, it really is a flagship for 21st century operations. These operations will be shaped by the need to operate at greater distance, and to strike with aircraft bearing significantly greater capability than the ones they are replacing. The Osprey and the F-35 Bravo can operate at greater distance, speed and lethality than what they are replacing. The F-35B will provide -- with its sister assets -- a change as big as that for which Admirals Sims and Halsey planned for with the introduction of the original aircraft carriers before World War II.

Indeed, this ship is roughly the size of the US aircraft carriers operating at the end of WW II. And as the ship's sponsor –- Lynne Pace, wife of Gen. Peter Pace, former Chairman of the Joint Chiefs –- put it to the veterans of the last USS America – a large deck carrier: "I know you (the crew of the former USS America) would love the name to go to an aircraft carrier, but this ship is a mini-aircraft carrier."


Second, the USS Ford (unhappycamper comment: around $40 billion dollars), the Navy's next super carrier, is being developed synergistically with the USS America class. According to NAVSEA officers and designers, the workflow for the USS America involving the F-35 is being discussed regularly with the Ford officers and designers. There is a cross-fertilization going on between the two new large aircraft surface assets as significant as when Sims and Halsey rethought the battleship navy and began moving to the carrier navy.

unhappycamper comment: And the best part is this bad boy costs only $3.4 billion (or so) dollars.
Posted by unhappycamper | Thu Oct 25, 2012, 08:59 AM (0 replies)

Army Modernizes, Modestly: Hard Upgrades To M1s, MRAPs, Humvees


Army Modernizes, Modestly: Hard Upgrades To M1s, MRAPs, Humvees
By Sydney J. Freedberg Jr.
Published: October 25, 2012

AUSA: It may sound ambitious, even hubristic, that the Army wants to fold all its modernization programs into a single 30-year plan. But the long-range look is all about living within limits.

The service wants to keep researching and developing 21st century weapons like the Joint Light Tactical Vehicle (JLTV) truck and the tank-like Ground Combat Vehicle (GCV), but it is also knows it must keep 1980s designs like the Humvee and the M1 Abrams tank for years to come. This sets up a nasty cycle. The more the new stuff gets cut, the longer the old stuff has to last, which requires careful investment in maintenance and upgrades.

Changes to one program's budget create ripple effects across the others. By building a long-term plan that links research, development, procurement, and sustainment, explained the Army's acquisition chief, Assistant Secretary Heidi Shyu, "we can understand implications if a program gets delayed, stretched out, or cut."


"Installing) the network in an MRAP ATV is not a cheap thing because it's not designed to carry it," said Kevin Fahey, a senior civil servant with long experience in the MRAP program. Fahey now bears the jawbreaking title of "Program Executive Officer, Combat Systems and Combat Support Systems," or PEO CS & CSS, for (not very) short. That gives him oversight over, among other things, the Army's massive fleet of trucks, from the venerable Humvee to the newer MRAPs to the prototype JLTV. Those vehicles are less exciting, and individually less expensive, than the tanks and other heavy combat vehicles -- but there are a lot more of them, so they loom large in Army budgets. Said Fahey, "if you add a small thing to 150,000 vehicles, it by definition becomes a large thing."
Posted by unhappycamper | Thu Oct 25, 2012, 08:49 AM (3 replies)
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